The owners of the A-listed Egyptian Halls in Union Street have been granted Listed Building Consent by the Scottish Government agency Historic Scotland.
And Accor Hotels has revised its proposals to create a four-star venue for the city centre, rather than the three-star originally planned.
Derek Souter, of owner USP Ltd's Egyptian Halls Project, said: "This reappraisal, which we had always pushed for, vindicates our long-held belief that Union Street has significant development potential.
"According to Glasgow City Marketing Bureau, there is a need for an extra 17,000 hotel, guest house and bed-and-breakfast bedrooms in the city and surrounding area.
"So once the ground floor is funded, we can also begin to confirm other interested leisure developers whose plans are on hold while we look for extra funding."
The Evening Times reported last August on the plans to convert the Alexander 'Greek' Thomson building into a 114-room three-star hotel.
The building has lain empty for 33 years, coming under threat of demolition in 2011.
However, a public campaign, backed by thousands of people, helped save the Halls.
Franchise Accor Hotels, managed by hotel operator Longrose Buccleuch, had initially planned to convert the building to a mid-range IBIS or Mercure hotel. But now it wants to transform it into one of its upmarket M Hotels, making it one of only 45 worldwide.
Steve Wright, of Accor Hotels, said: "As planning has now been approved we can see the development becoming a very desirable location within Glasgow.
"Accor thinks the Egyptian Halls would make a perfect M Gallery."
Planning permission was granted last December.
Funding for the hotel is secure but a further £10m is needed to refurbish the ground floor level of the Halls.
The owner said the lower level upgrade would rely on "substantial public subsidy", but Glasgow City Council said no funding was currently available.
However, it said the only remaining obstacle to beginning the refurbishment is agreeing public and private sector funding.
Mr Souter said talks were under way and should be concluded in the next two months.
Richard Heggie, planning consultant of TPS Planning, which is also involved in the scheme, said: "This is evidence Glasgow City Council's new and embryonic city centre strategy is beginning to work effectively."